China's Destocking Spurs LNG Imports, Driving Up European Gas Prices
Goldman Sachs warns that Europe's gas prices may rise further due to increased demand for liquefied natural gas (LNG) imports from China. The bank notes that despite a small decline in April, China's gas demand is expected to recover ahead of winter, driven by destocking efforts. This could lead to stronger LNG imports and higher prices in Europe, especially if energy flows through the Strait of Hormuz remain disrupted.
According to Goldman Sachs, China's gas storage levels were lower than expected in April, resulting in a year-over-year decline for the first time in several years. The bank estimates that TTF prices may reach 65 euros per megawatt-hour in the third quarter and 53 EUR/MWh in the fourth quarter if energy flow normalization is delayed until late July.
High-frequency data on China's LNG imports shows a closing gap with last year's levels, and the Asia LNG price premium to European gas remains strong. This incentivizes supply re-routes from the Atlantic to the Pacific, adding to Europe's already tight gas market.